When it comes to home mortgages, a so-called “underwater” homeowner is one who owes more on his or her mortgage than the home is worth. Underwater mortgages have been a particular problem in recent years. Where is the situation most severe? N.C. State University economist Mike Walden answers.

“Of course, underwater mortgages developed as a result of the tremendous drop in home values that occurred during the recession by as much as a third. So what we would expect to see is that underwater mortgages are more of a problem in those states and regions where you’ve had a bigger drop in home prices.

“And, indeed, that’s just the case. Underwater mortgages have been largest in terms of states like Florida, California, Nevada, Arizona and, closer to North Carolina, in Georgia. These are states that first of all had a big run up in home prices during the housing boom, then had a big decline during the housing bust.

“And in these states, underwater mortgages right now can be as high as 35 percent of all mortgages. Now, fortunately, North Carolina — certainly there’s a problem here, but it’s not as severe as some of the states I’ve mentioned. The data show right now that underwater mortgages are somewhere between 15 and 25 percent of all mortgages.

“And hopefully … as we are beginning to see some signs of home prices going up, that’s going to actually reduce the problem we have with underwater mortgages.”

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